Denny’s to Close 150 Restaurants Amid Financial Struggles and Changing Consumer Habits

Denny's, the iconic American diner chain, has announced plans to close 150 of its restaurants by the end of 2025 due to declining revenue and shifting consumer habits. The decision, revealed during an earnings call on Tuesday, involves the closure of about 50 locations by the end of 2024 and an additional 100 in 2025. This move represents a 10% reduction in the number of Denny’s restaurants, leaving approximately 1,375 locations operational once the process is complete.

The closures are targeted at underperforming locations that are either too old to be remodeled or situated in areas that have become unprofitable. According to Steve Dunn, Denny’s Executive Vice President and Chief Global Development Officer, these restaurants have been straining the company’s finances. The pandemic has also played a role, with some locations experiencing persistent declines in customer traffic that have not rebounded.

In addition to the closures, Denny’s is making significant changes to its operations. The chain is relaxing its requirement for 24/7 operating hours, a policy that has been in place for decades. Since the pandemic, about a quarter of Denny’s restaurants have not resumed round-the-clock service, and the company has acknowledged that maintaining these hours is no longer viable due to reduced customer traffic during off-peak times.

Denny’s is also streamlining its menu, reducing the number of items from 97 to 46. This move is part of an effort to focus on value and simplify operations. The company has observed that financially constrained customers are increasingly opting for items from the children’s menu to save money.

The financial struggles of Denny’s are reflected in its recent earnings report, which showed lower-than-expected earnings for the third quarter. Total operating revenue dropped from $114 million to $111 million, and operating income fell from $14 million to $11 million. Following the announcement, Denny’s stock plummeted nearly 18% on Tuesday, adding to a year-to-date decline of almost 50%.

Denny’s is not alone in its financial woes; several other restaurant chains have faced similar challenges. Red Lobster and Rubio’s Coastal Grill have filed for bankruptcy, and Mod Pizza narrowly avoided bankruptcy after being acquired by Elite Restaurant Group. These struggles are attributed to high inflation, increased labor costs, and declines in customer demand).